Moscow’s ‘billion-dollar deals’ to build nuke reactors in Iran

The economic, geopolitical and strategic ties between Tehran and Moscow have recently been on the rise; particularly after the Crimean crises and since President Hassan Rowhani participated in the Shanghai Cooperation Organization summit in Bishkek.

Several Iranian-Russian energy deals worth billions of dollars have inevitably raised concern in the West and the United States. Russia and the Islamic Republic have been capable of undermining Western sanctions, undercutting the efficacy of the sanctions on Tehran by using other methods of exchanges outside of the dollar in order to facilitate these deals.

The recent deals being negotiated include the oil-for-goods exchange which are worth $1.5 billion a month. This will assist Tehran in increasing its oil exports by nearly 50 percent to boost its economy. According to Reuters, Iran will provide approximately 500,000 barrels of oil a day. Russia will deliver equipment and goods in exchange.

European countries are increasingly looking at Tehran as a potential resource to wean themselves off Russia

Dr. Majid Rafizadeh

The total deal is worth an estimate of $20 billion. “Our officials are discussing the matter with the Russians and hopefully it will be inked soon, regardless of whether we can reach a [nuclear] agreement in Geneva,” a senior Iranian official told Reuters.

The other substantial economic collaboration between Tehran and Moscow includes the $8 billion to $10 billion energy deal. This deal would require Moscow to export 500 megawatts of electricity to Iran, upgrade Iran’s power plants, construct new thermal and hydroelectric generating plants, as well as provide electrical transmission lines in exchange for oil.

The third bilateral deal being negotiated is Russia’s plan to build eight additional nuclear reactors in the Islamic Republic. Two of these reactors will be at the Bushehr power plant. “Russia and Iran may sign an intergovernmental agreement this year on building from four to eight nuclear reactors, and, under the deal, the contract for the construction of the first two reactors as additions to Bushehr,” an official source told Reuters.

In such deals, Russian state nuclear corporation Rosatom generally manages the construction of new nuclear reactors. Moscow previously built Iran’s operating nuclear power reactor at Bushehr. Part of the West’s concern is linked to Iran’s Bushehr project, which can yield adequate enriched uranium to be utilized in nuclear weapons.

Strategic, geopolitical and economic purposes

While some experts might sum up the reason behind Iranian-Russian cooperation as economic it is, nevertheless, crucial to point out that Moscow-Tehran ties rely on a combination of factors: strategic, geopolitical and economic. While for the Islamic Republic, these economic and energy deals will substantially boost Tehran’s struggling economy, for Russia the strategic benefits outweigh the economic purposes.

Both Hassan Rowhani and Vladimir Putin’s governments view their increased bilateral relationships as a bulwark against U.S. and European influence in the region. This heightened cooperation is likely to increase Moscow’s political leverage and regional presence in the future.

In addition, Tehran views Moscow as a powerful pawn against the American position on the Islamic Republic, Washington’s objectives and presence in the region and Gulf, as well as a counterbalance against the American influence.

Inevitable tensions between Tehran and Moscow

On the other hand, it is critical to point out that although many experts have analyzed and interpreted the recent heightened Russia-Iran cooperation as solely beneficial, depicting Moscow and Tehran as natural allies, tensions between Russia and the Islamic Republic do exist and are likely to come to the forefront.

First of all, both the Islamic Republic and Russia are major energy exporters. According to the latest estimate of world gas reserves, the Islamic Republic has surpassed Russia and is ranked number one. According to IRIB, the world’s natural gas reserves of 187.3 trillion cm “is sufficient for 56 years. Russia has lost its position of the country having much blue fuel. According to calculations, the natural gas reserves fell to 32.9 trillion cm from 44.6 trillion cm. Iran has become first with the 33.6 trillion cm of blue fuel.” BP, the UK-based energy corporation, has also placed Iran at the top of the world’s gas-rich countries.

This issue is becoming more crucial since the Ukraine crisis began. The tensions between Putin and European leaders over Crimea as well as Moscow’s threats to cut off gas supplies, have forced European countries to search for other alternatives for their gas imports, decreasing their dependence on Moscow. The European Union imports approximately 30 percent of its natural gas from Russia, according to a Bloomberg report. Some European countries import more than 60 percent of their natural gas from Russia.

European countries are increasingly looking at Tehran as a potential resource to wean themselves off Russia. In addition, Moscow is cognizant of the fact that Iran is eager to step in and export natural gas to the European Union.

Finally, some Iranian politicians, particularly the reformists and moderates, do not trust Moscow as a reliable geopolitical, strategic and economic partner in global and regional politics. Russia has joined other members of the U.N. Security Council in voting for and passing four rounds of sanctions on the Islamic Republic.

From the Iranian perspective, Russia has been playing a double-cross strategy by opting out when Tehran needed Moscow on the global stage, and by selling out Tehran in order to serve their economic interests with the West and United States. This illustrates the Rowhani government’s eagerness to mend relationships with the West and the United States in order to decrease its reliance and dependence on Russia.

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Dr. Majid Rafizadeh, an Iranian-American political scientist and scholar as Harvard University, is president of the International American Council and he serves on the board of Harvard International Review at Harvard University. Rafizadeh served as a senior fellow at Nonviolence International Organization based in Washington DC. He is also a member of the Gulf project at Columbia University and Harvard scholar. He is originally from the Islamic Republic of Iran and Syria. He has been a recipient of several scholarships and fellowship including from Oxford University, Annenberg University, University of California Santa Barbara, and Fulbright Teaching program. He served as ambassador for the National Iranian-American Council based in Washington DC, conducted research at Woodrow Wilson International Center for Scholars, and taught at University of California Santa Barbara through Fulbright Teaching Scholarship. He can be reached at rafizadeh@fas.harvard.edu.